Organization Design Is A Decision Making Process Business Essay

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Organization design is the deliberate process of configuring structures, processes, reward systems, and people practices to create an effective organization capable of achieving the business strategy. The organization is not an end in itself; it is simply a vehicle for accomplishing the strategic tasks of the business. It is an invisible construct used to harness and direct the energy of the people who do the work. We believe that the vast majority of people go to their jobs each day wanting to contribute to the mission of the organization they work for. Too often, however, the organization is a barrier to, not an enabler of, individual efforts.We have observed that when left to their own devices, smart people figure out how to work around the barriers they encounter, but they waste time and energy that they could direct instead to improving products and services, creating innovations, or serving customers. One of the main purposes of organizational design is to align individual motivations with the interests of the organization and make it easy for individual employees to make the right decisions every day. Furthermore, a well-designed organization makes the collective work of accomplishing complex tasks easier. This chapter begins with an overview of the Star Model, TM which provides a decision-making framework for organization design. We highlight the key concepts associated with each point on the star, which we expand on in the other chapters. The chapter concludes with a summary of themes that serve as our design principles.

A Framework for Decision Making

Organization design is a decision-making process with numerous steps and many choices to make. A decision made early in the process will constrain choices made later, foreclose avenues of exploration, and eliminate alternatives, resulting in far-reaching impacts on the ultimate shape of the organization. Making sound decisions at these early, critical junctures requires a theoretical framework that gives credence to one choice over another. Yet many leaders and their teams still make organization design decisions based largely on their own individual experience and observation. A common framework for decision-making has a number of benefits.

It: Provides acommonlanguage for debating options and articulatingwhy one choice is better than another in objective, impersonal terms Forces design decisions to be based on longer-term business strategy rather than the more immediate demands of people and politics Provides a clear rationale for the choices considered and an explanation of the implications of those choices as the basis for communication and successful change management

_ Allows decision makers to be able to evaluate outcomes, understand root causes, and make the right adjustments during implementation The Star Model (Figure 1.1), which serves as our framework, has been used and refined over the past thirty years. Its basic premise is simple but powerful: different strategies require different organizations to execute

Star Model.

A strategy implies a set of capabilities at which an organization must excel in order to achieve the strategic goals. The leader has the responsibility to design and influence the structure, processes, rewards, and people practices of the organization in order to build these needed capabilities. Although culture is an essential part of an organization, it is not an explicit part of the model because the leader cannot design the culture directly. An organization's culture consists of the common values, mindsets, and norms of behavior that have emerged over time and that most employees share. It is an outcome of the cumulative design decisions that have been made in the past and of the leadership and management behaviors that result from those decisions. The idea of alignment is fundamental to the Star Model. Each component of the organization, represented by a point on the model, should work to support the strategy. The more that the structure, processes, rewards, and people practices reinforce the desired actions and behaviors, the better able the organization should be to achieve its goals. Just as important as initial alignment is having the ability to realign as circumstances change. The configuration of resources, the processes used, and the mental models that contribute to today's success will influence the plans made for the future. In a time of stability, this creates efficiency. In a time of change, such static alignment can become a constraint. The organization must have alignment, but it also needs the flexibility to recognize and respond to opportunities and threats. It is always easier to change a business strategy than to change an organization, just as it is easier to change a course beforehand than it is to turn a large ship that is already under way. The more rapidly the organization can be realigned, the faster the leaders can "turn the ship" and execute new strategies and opportunities as they arise. This is especially important for large companies that must compete against smaller, nimbler organizations. Therefore, alignment is best thought of as an ongoing process rather than a one-time event.


Strategy is a company's formula for success. It sets the organization's direction and encompasses the company's vision and mission, as well as its shortandlong- term goals. The strategy derives fromthe leadership's understanding of the external factors (competitors, suppliers, customers, and emerging technologies) that bear on the firm, combined with their understanding of the strengths of the organization in relationship to those factors. The organization's strategy is the cornerstone of the organization design process. Without knowledge of the goal, no one can make rational choices along the way. In other words, if you do not know where you are going, any road will get you there. The purpose of a strategy is to gain competitive advantage: the ability to offer a customer better value through either lower prices or greater benefits and services than competitors can (Porter, 1998). These advantages can be gained through external factors such as location or favorable government regulation. They can also be secured through superior internal organizational capabilities. We define organizational capabilities as the unique combination of skills, processes, technologies, and human abilities that differentiate a company. They are created internally and are thus difficult for others to replicate. Creating superior organizational capabilities in order to gain competitive advantage is the goal of organization design. We will also refer to transferring capabilities. To transfer and, when necessary, adapt a company's capabilities or advantages is one of the key jobs of any manager when opening up a new location or unit.

Factors that differentiate the organization and provide competitive advantage. This is important, as there are many things at which a company has to be as good at as its competitors, but just a few where it truly needs to be better.

Learning out come 2

Organizational Frameworks

The main objective of the HRM FRAM is to create an organisation containing the 'right people, in the right posts, at the right time'. All the processes and sub-processes in the model aim to achieve this objective. The FRAM considers ways of recruiting, retaining and discharging personnel.

The issues involved in Human Resources Management can be split as operational and strategic HRM. As an example, operational deals with individuals, such as career planning, whilst strategic focuses on the system as a whole.

Strategic HRM is a general approach to the management of human resources in accordance with the intentions of the organisation on the future direction it wants to take. It is concerned with longer-term people issues and macro-concerns about structure, quality, culture, values, commitment and matching resources to future need. Strategic HRM is the overall framework which determines the shape and delivery of the individual strategies.

Operational HRM activities are tactical in nature. Examples of activities are employment applications are processed, current openings are filled, supervisors are trained, safety problems are resolved and wages and salaries are administered. The operational HRM activities should be aligned with the overall HR strategies.

The HRM FRAM considers six high-level processes. The Manage Personnel Life-cycle and Administer Personnel processes are operational, and the Review and Plan HR Requirements and Develop and Maintain HR Strategies processes are strategic. Although Managing HRM Processes and Develop and Maintain HR Policies are both operational and strategic level processes, they are considered to be as operational, since most of their sub processes are more operational, than strategic.


The Internet allows organizations to reach large numbers of candidates easily and efficiently. Thousands of candidates can visit a company web site and submit an application.

Roles and Responsibilities

Time lines

Conflict of interest

Decision- making

Selection Criteria

The selection criteria should be based on the job description and should focus on the qualifications, experience and skills needed to undertake the position. The selection criteria should be split into essential and desirable. Essential criteria are those without which it is impossible to perform the job. Desirable criteria are those which enable the job to be performed more effectively. Essential criteria for all positions should include: Provision for recognition of prior learning (e.g. on-the-job experience, overseas qualifications, and life experience)

The ability to work positively with people from diverse cultural, linguistic and educational backgrounds Essential and desirable criteria should not include requirements which disadvantage particular groups. For example, requiring a knowledge of the local geographic area will exclude recent arrivals. Requiring tertiary qualifications which are not essential for the position will often exclude applicants from more diverse backgrounds.

The selection criteria should be specific enough to permit the Selection panel to choose between applicants, but broad enough not to rule out good applicants.

Short listing

Short listing process

Applications should be short listed against the selection criteria, looking first at the essential criteria and then the desirable criteria. Applicants should be excluded in the following order:

Those who do not meet all the essential criteria

Those who do not meet any of the desirable criteria

Those who do not meet all the desirable criteria

Those who do not meet the essential and desirable criteria as well as other applicants

Effective recruitment steps

Three steps to develop an effective recruitment process are

Step 1: Ensure an up-to-date job description which contains information related to:

• Specific tasks and activities required for a job

• The knowledge, skills and abilities required for effective performance by the job incumbent.

Step 2: Develop an effective recruitment strategy which considers:

• Appropriate sources of recruitment (i.e., advertisements, personal referrals, employment

agencies, direct applications)

• Appropriate recruiters (e.g., supervisor or co-worker).

Step 3: Evaluate the recruitment strategy to determine its effi cacy. For example:

• Conduct a cost-benefi t analysis in terms of the number of applicants referred, interviewed, selected, and hired

• Compare the effectiveness of applicants hired from various sources. Evidence-based best practice for three of the most commonly used selection techniques is outlined below.

Curriculum vitae

Conducting interviews

Reference checks

Induction and orientation of new workers

An effective induction helps new workers understand their role and where they "fit" within the organisation. It also equips them with the tools they need to perform their work role. Two useful induction tools are:

1. Induction manual / kits which may contain:

• An induction checklist

• Organisational philosophy / ethics / history

• Strategic values of the organisation

• An organisational chart / structure

• An employment manual on policies and procedures

• An orientation to the workplace (including parking and safety issues)

• Information about episodes of care, the duty system, supervision, staff meetings, etc.

Leaning out come 3

Organizational culture

The success of any company depends in part on the match between individuals and the culture of the organization. Organizational culture is the set of operating principles that determine how people behave within the context of the company. Underlying the observable behaviors of people are the beliefs, values, and assumptions that dictate their actions.

Managers need an accurate understanding of the organization's culture in order to direct activities in a productive way and to avoid the destructive influence of having employees who are not committed to the company's goals. A shared sense of purpose starts with the hiring process and continues with careful attention to how employees are motivated and rewarded for their efforts. Managers need to continually transmit the values of the culture through efforts such as story telling, rituals and firm-sponsored social events, as well as consistent positive feedback that gives each member of the organization a sense of importance.

Creating an environment where people enjoy and value their work is key. To do this effectively, leaders must be sure to communicate clear expectations for every member of the organization. These expectations should be supported by the words and actions of managers who regularly let people know how their work is important to the organization. Individuals should be given assignments that are consistent with their strengths and interests, and opportunities for continued learning and growth should be provided as well.

The importance of understanding organizational culture cannot be overlooked. The bottom line for managers who want to create a culture of success is to start with creating a positive environment. Bring in people whose values are in line with the organization's culture, and continue to acknowledge success and involve the whole organization in maintaining an environment that allows people to enjoy working hard to meet the company's goals.

Disciplinary and grievance procedure

Disciplinary rules and procedures help to promote orderly employment relations as well as fairness and consistency in the treatment of individuals. Disciplinary rules tell employees what behaviour employers expect from them. If an employee breaks specific rules about behaviour, this is often called misconduct. Employers use disciplinary procedures and actions to deal with situations where employees allegedly break disciplinary rules. Disciplinary procedures may also be used where employees don't meet their employer's expectations in the way they do their job. These cases, often known as unsatisfactory performance (or capability), may require different treatment from misconduct, and disciplinary procedures should allow for this. First formal action - unsatisfactory performance

Following the meeting, an employee who is found to be performing unsatisfactorily should be given a written note setting out:

• the performance problem;

• the improvement that is required;

• the timescale for achieving this improvement;

• a review date; and

• any support the employer will provide to assist the employee.

The employee should be informed that the note represents the first stage of a formal procedure and that failure to improve could lead to a final written warning and, ultimately, dismissal. A copy of the note should be kept and used as the basis for monitoring and reviewing performance over a specified period (eg six months).

First formal action misconduct

Where, following a disciplinary meeting, an employee is found guilty of misconduct, the usual first step would be to give them a written warning setting out the nature of the misconduct and the change in behaviour required.

The employee should be informed that the warning is part of the formal disciplinary process and what the consequences will be of a failure to change behaviour. The consequences could be a final written warning and ultimately, dismissal. The employee should also be informed that they may appeal against the decision. A record of the warning should be kept, but it should be disregarded for disciplinary purposes after a specified period (eg six months).

Final written warning

Where there is a failure to improve or change behaviour in the timescale set at the first formal stage, or where the offence is sufficiently serious, the employee should normally be issued with a final written warning - but only after they have been given a chance to present their case at a meeting. The final written warning should give details of, and grounds for, the complaint. It should warn the employee that failure to improve or modify behaviour may lead to dismissal or to some other penalty, and refer to the right of appeal. The final written warning should normally be disregarded for disciplinary purposes after a specified period (for example 12 months).

Dismissal or other penalty

If the employee's conduct or performance still fails to improve, the final stage in the disciplinary process might be dismissal or (if the employee's contract allows it or it is mutually agreed) some other penalty such as demotion, disciplinary transfer, or loss of seniority/ pay. A decision to dismiss should only be taken by a manager who has the authority to do so. The employee should be informed as soon as possible of the reasons for the dismissal, the date on which the employment contract will terminate, the appropriate period of notice and their right of appeal.

It is important for employers to bear in mind that before they dismiss an employee or impose a sanction such as demotion, loss of seniority or loss of pay, they must as a minimum have followed the statutory dismissal and disciplinary procedures. The standard statutory procedure to be used in almost all cases requires the employer to:


Write to the employee notifying them of the allegations against them

and the basis of the allegations and invite them to a meeting to discuss

the matter.


Hold a meeting to discuss the allegations - at which the employee has

the right to be accompanied - and notify the employee of the decision.


If the employee wishes to appeal, hold an appeal meeting at which the

employee has the right to be accompanied - and inform the employee

of the final decision.

Dealing with grievances in the workplace

Employees should aim to resolve most grievances informally with their line manager. This has advantages for all workplaces, particularly where there might be a close personal relationship between a manager and an employee. It also allows for problems to be resolved quickly.

If a grievance cannot be settled informally, the employee should raise it formally with management. There is a statutory grievance procedure that employees must invoke if they wish subsequently to use the grievance as the basis of certain applications to an

employment tribunal.

Raising a grievance

Employees should normally raise a grievance with their line manager unless someone else is specified in the organisation's procedure. If the complaint is against the person with whom the grievance would normally be raised the employee can approach that person's manager or another manager in the organisation. In small businesses where this is not possible, the line manager should hear the grievance and deal with it as impartially as possible.

Managers should deal with all grievances raised, whether or not the grievance is presented in writing. However, employees need to be aware that if the statutory procedure applies, they will not subsequently be able to take the case to an employment tribunal unless they have first raised a grievance in writing and waited a further 28 days before presenting the tribunal claim.

Setting out a grievance in writing is not easy - especially for those employees whose first language is not English or who have difficulty expressing themselves on paper. In these circumstances the employee should be encouraged to seek help for example from a work colleague, a trade union or other employee representative. Under the Disability Discrimination Act 1995 employers are required to make reasonable adjustments which may include assisting employees to formulate a written grievance if they are unable to do so themselves because of a disability.

Grievance meetings

On receiving a formal grievance, a manager should invite the employee to a meeting as soon as possible and inform them that they have the right to be accompanied. It is good practice to agree a time and place for the meeting with the employee. Small organizations might not have private meeting rooms, but it is important that the meeting is not interrupted and that the employee feels their grievance is being treated confidentially. If an employee's companion cannot attend on a proposed date, the employee can suggest another date so long as it is reasonable and is not more than five working days after the date originally proposed by the employer. This five day time limit may be extended by mutual agreement.

The employee should be allowed to explain their complaint and say how they think it should be settled. If the employer reaches a point in the meeting where they are not sure how to deal with the grievance or feel that further investigation is necessary the meeting should be adjourned to get advice or make further investigation. This might be particularly useful in small organisations that lack experience of dealing with formal grievances. The employer should give the grievance careful consideration before responding.

Employers and employees will normally be expected to go through the statutory grievance procedures unless they have reasonable grounds to believe that by doing so they might be exposed to a significant threat, such as violent, abusive or intimidating behaviour, or they will be harassed. There will always be a certain amount of stress and anxiety for both parties when dealing with grievance cases, but this exemption will only apply where the employer or employee reasonably believes that they would come to some serious physical or mental harm; their property or some third party is threatened or the other party has harassed them and this may continue.

Equally, the statutory procedure does not need to be followed if circumstances beyond the control of either party prevent one or more steps being followed within a reasonable period. This will sometimes be the case where there is a long-term illness or a long period of absence abroad but wherever possible the employer should consider appointing another manager to deal with the procedure.

Step 1: Statement of grounds for action and invitation to meeting

Step 2: The meeting

Step 3: Appeal